Wondering what are Department Stores and How they Function?

Your A-Z guide to understanding the mechanism of department stores 

One problem to all your solutions – that is what a department store is all about. These stores are the urban messiah everyone needs. We already have a lot on our plate and running to different stores for a variety of day-to-day things can just add to the pain. That is where department stores swoop in donning the superhero cape with all the things that you need just spread across aisles. You have aisles after aisles with neatly stacked goods categorised according to sizes and types, saving precious shopping hours.

Technically speaking, a department store is nothing but a segmentation of horizontal retailing.  It is a retail establishment that offers a wide range of consumer goods in different categories called departments (thus getting its name). You get most of the fast moving consumer goods as well as fresh products under the same roof. Most of the department stores around us are franchises of a larger retail chain. You will also see smaller and locally-operating department stores which are independent retailers. These days, there are online department stores too. Amazon.com is one such online shopping site that operates on the principles of department store retailing. Even eBay is one such example.

What Are The Features of a Department Store?

The most prominent feature that sets apart department stores from other forms of retail is the space that it spreads out on. Apart from the physical area of the store, here are the other features of department stores:

1. It is a large retail establishment

As discussed earlier, the area covered by the store is a big factor. A departmental store is basically a vast retail institution where all kinds of goods are sold from one counter. In case of a retail chain, one needs to acquire the franchise permit before opening a branch unit of the chain. Therefore, most department stores operate as joint stock companies. One needs to invest adequate capital in establishing and running a department store.

2. They are centrally located

Apart from the small departmental stores in every locality, most franchise departmental stores are established in the central locations of cities so that they are easily accessible to a multitude of people. The busier the area, the better will be the footfall. So, owners tend to aim for the malls to draw in more customers.   

3. They have a variety of departments

Goods are separated and categorised according to the type. Separate departments sell packaged food items, green groceries, toiletries, and garments. Every department sells the kinds of goods fixed to the department.

For example, let us consider beauty products. The face creams, body lotions and foot creams are all separated in different segments. However, there is an exception to this rule. Departmental stores like Macy's stack the goods according to brands and not the type of products. 

4. They sell a wide variety of goods

The primary objective of a departmental store is to provide a range of products from one place to satisfy all kinds of daily needs of its customers. From the needle to a plane – that is what they say about departmental stores. This means that they have A to Z goods under the same roof. That is also the thought behind Amazon’s logo where the A connect to the Z with an arrow meaning that you get everything from ready-made garments to household goods, from furniture to electrical goods in a department store.

5. They are centrally managed

The management operates all the segments of departmental store management, and the ultimate control rests with the central level management. However, each department is given the option to purchase, sell and advertise their goods. You will find brand marketers in the respective aisles who are representatives from the brand and not a part of the central management.

6. They are equipped with special facilities

Other than providing all the necessary goods to the customers, department stores also offer facilities like goods on credit, home delivery of products, cafeteria, and telephone & mail services to customers. This helps them in attracting more customers.  

Examples of the Most Successful Department Stores

Here are the 5 best examples of the most successful departmental stores from across the world.

1. Macy's

Macy's is a household name in America, and the chain was founded by Rowland Hussey Macy in 1858. The holding company is Macy's, Inc. and even Bloomingdales is a part of this hosting company. Macy's is the largest U.S. department store in terms of retail sales. Its flagship store is located at Herald Square in New York City, and the retail company has 584 full-line stores throughout the United States and Puerto Rico. In spite of being among the cheap department stores, the annual turnover of the company was $24.8 billion as of 2018.

2. Walmart Inc. 

Walmart too is an American multinational retail corporation that operates as department stores across the USA. It is a publicly traded family-owned business that is controlled by the Walton family. The headquarter flagship store is in Arkansas and apart from that there are 11,348 stores across 27 countries, operating under different names. According to the Fortune Global 500 list in 2018, Walmart is the world's largest company in terms of revenue with annual revenue of over US$ 500 billion. It also ranks as the largest private employer with 2.2 million employees working directly and indirectly under the brand.

3. Selfridges, London

Spreading across 10 acres, Selfridges is one of the best departmental stores in the world. The company operates from England and is known for its famous window displays that have been featured in several magazines like Vogue. It is a high-end departmental store nestled in the shopper's paradise Oxford Street. The store mostly sells garments, accessories and jewellery.  

4. Harrod’s, London

The largest departmental store, Harrod’s is spread over a million square feet with more than 330 departments. The store promises that you will find everything while visiting this giant of a department store. The stores have innumerable departments and they even give the buyer the prerogative to book a personal shopping assistant who helps in the customer explore all the aisles and zero in on the ultimate product. They also have an elaborate food section with a restaurant within the departmental store.

5. Tesco

The ninth-largest retailer in the world measured in terms of revenues, Tesco is a British multinational groceries and merchandise retailer. The headquarters are in Hertfordshire, England. It has shops in 7 countries across Asia and Europe and is the leader in the groceries market in the UK. The best thing about Tesco is the diversified departments they have. They deal in retailing of books, clothing and electronics to name a few.

Difference Between Department Stores and Supermarket Stores

A department store is a large retail store offering a variety of merchandise segregated in separate departments. Whereas, a supermarket is a self-service retail market that sells mostly household items and groceries.

When it comes to size, departmental stores are more extensive than supermarkets. This is mostly because departmental stores are divided into many floors whereas supermarkets have only one storey. Another striking difference between a departmental store and a supermarket is the stock of products sold.

Unlike departmental stores, supermarkets do not sell garments, jewellery, or hardware. On the other hand, you will get fresh produce, dairy and meat in a supermarket but not in a departmental store. Lastly, supermarkets are generally owned by corporate retail chains, unlike departmental stores, which are more of a joint stock company or a government venture.

Management of a Departmental Store

Since departmental stores have several divisions and sections, it is only effective management that can keep it running smoothly. The management hierarchy followed in the retail structure of a departmental store involves managers and administrators at different levels. This helps in keeping all the levels well coordinated and connected with one another. Departmental management is built on the principle of division of labour, and each employee is given different responsibilities and duties.

Here is how the hierarchical management system of a department store looks like:

Under Store Management

Store management involves management of the staff of the store to ensure that everything is working as per protocol. Apart from staff management, store security, store discipline product and customer management are some of the main areas that store management looks into. The hierarchy consists of the following:

• A Store Manager manages and supervises the activities of the staff members. He/she also looks into the matter of customer satisfaction. The store managers keep check on proper product shelving and security of the store in general.

• A Section Manager handles a section of the store such as the groceries section, the kid’s section, and the furnishing section. He or she manages the staff working in the part assigned to him/her.  

• A Security Manageris responsible for the safety of the store from theft and other threat like breaking in. He/she is given the responsibility of hiring competent security personnel who keep a check on customers through CCTV surveillance.

Under Marketing Management

Every departmental store has a marketing management team whose primary duty is to attract the maximum number of customers towards it. The marketing management has positions like the marketing head. There is a marketing manager, a promotions manager, an advertising manager and a regional manager (in case of a franchise store).

Under Merchandising Management

The merchandising management of a departmental store is responsible for inventory control, proper allocation of products into the correct sections and purchasing. The management team usually consists of a merchandise manager, a warehouse manager, an inventory manager and the head purchaser with a team of purchasers working under him/her.

Under Human Resources Management

If the store is a large one, then it may have an HR department. This department is responsible for recruitment, training, and payment of salaries to the rest of the employees. The team generally comprises an HR manager, an HR executive, a payroll manager and a trainer.

Under Finance and Accounting Management

The finance department handles the accounts and financial statements of the department store. The job positions in this branch of management are that of a finance manager, an accounting manager and one or many accountants as per requirements.

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